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Lower Provisions for Loan Losses Are Boosting Earnings for S&P 500 Banks for Q1

By John Butters, Apr 19, 2021

The Financials sector was a focus sector for the market this past week, as 15 of the 22 companies in the S&P 500 that reported actuals earnings for Q1 during the week were in this sector. Most of these companies were in the Banks industry, including JPMorgan Chase, Wells Fargo, Bank of America, and Citigroup. This industry has the largest year-over-year earnings growth rate of all five industries in the sector at 248%. It is the largest contributor to earnings growth for the sector. If this industry were excluded, the blended (combines actual results for companies that have reported and estimated results for companies yet to report) earnings growth rate for the Financials sector would fall to 58.8% from 118.8%. However, it should be noted that the (blended) revenue growth rate for the Banks industry for Q1 is only 3%. How is it possible for an industry to report earnings growth of almost 250% and revenue growth of only 3%?

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